Abu Dhabi plans up to $1.5 billion Saudi Aramco IPO stake

The Abu Dhabi government has not made a final decision on which state entities will participate in the deal and the precise size of the investment could change.

Bloomberg/Simon Dawson

Abu Dhabi is planning to put as much as $1.5 billion into Saudi Aramco’s initial public offering (IPO), as the oil giant taps friendly neighbours to prop up a deal that is so far failed to draw foreign investors, reported Bloomberg.

The emirate is seeking to make the investment through one or more state-linked entities. Saudi Aramco representatives met officials of some top Abu Dhabi funds and companies this week to discuss the potential commitments.

Bringing in a major investor from outside the Kingdom would be a relief for Saudi Arabia after plans to market the IPO globally were abandoned. Saudi Aramco had high hopes of drawing in sovereign investors, including a big commitment from China, but has yet announce any firm commitments.

If Abu Dhabi puts in an order of that size it would mean that the institutional offering is almost certainly fully covered. Samba Capital, lead manager on the offering said that institutional subscriptions totalled SAR 58.4 billion ($15.6 billion), representing about 90 per cent of the institutional tranche.

Saudi Arabia plans to raise more than $25 billion, selling a 1.5 per cent stake in the company at a valuation of between $1.6 trillion and $1.7 trillion. Of that, one per cent is earmarked for institutional investors and the rest for Saudi retail buyers.

After international money managers baulked at the valuation Crown Prince Mohammed bin Salman wanted for the company, Saudi Aramco decided to lean heavily on local investors, large and small, to get the job done. The Saudi authorities have secured commitment from some of the Kingdom’s wealthiest families.

The banking system is also being used to boost demand. The Saudi Arabian Monetary Authority will allow smaller retail investors to borrow twice their cash investment, double the normal leverage limits the regulator allows for IPOs.

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